Starting off – it’s a bit unfair to bracket Pareto Analysis as just a Six Sigma tool.

Pareto Analysis gets its name from it’s creator Vilfredo Pareto the Italian economist – his rule, often called the 80-20 rule identified that 80% of effects comes from 20% of the causes. Pareto is a very common management tool and isn’t solely tied to six sigma

Understanding Pareto can really help when problem solving in six sigma as it helps focus on the key issues.

Pareto has a number of associated tools – namely the Pareto chart that diagramatically presents the findings of Pareto analysis.

Examples of Pareto

1/ 80% of Defects arise from 20% of process issues
2/ 80% of revenue is derived from 20% of customers
3/ 80% of material is derived from 20% of suppliers

While it’s unrealistic to assume it will always be 80% or 20% exactly the principle is the same – a large quantity will be generated by a small quantity. Interestingly the most telling Pareto analysis pertaining to six sigma is that 80% of issues will be relatively simple to resolve – the remaining 20% will require the most resources and effort!